New Thinking On BoC Rate Hike

New Thinking On BoC Rate Hike

Brokers are anticipating a particularly busy 2014 as clients look to move before the Bank of Canada does, although there’s new thinking on the timing of its long-awaited hike in the overnight rate.

“The Federal Reserve calmed potential homeowners and investors by signalling it won’t raise the rate until the economy improves further, which by its own estimates, probably won’t be until 2015,” Bob Aggarwal, president of Canadalend.com said in a statement. “And because the Canadian economy is so dependent upon the U.S. economy, the chance that the Bank of Canada will raise its overnight rate, which is what the prime mortgage rate is tied to, ahead of the U.S. is remote.”

And with the central bank refusing to raise its rate until late 2015, the next two years may still provide ultra-low interest rates to entice buyers to jump into the market.

“By keeping its policy rate at one per cent, the Bank of Canada has created one of the most stable and favourable and borrowing environments for potential homeowners in decades,” Aggarwal said. “It looks like it will continue to be a great time for home buyers for at least a couple more years.”

However, that opportunity won’t last forever as, sooner or later, the Bank of Canada will have to raise its rate.

“The near-record low interest rate environment cannot last against the backdrop of an improving economy,” Aggarwal said. “The Organization for Economic Co-operation and Development believes that with the Canadian and global economies returning to more stable ground, the Bank of Canada will need to raise interest rates in 2014 and more than double the current interest rate by the end of 2015.”

The Bank of Canada has held its overnight rate at one per cent since September 2010 and many believe it will continue to do so until after the U.S. Federal reserve raises its own benchmark rate.

By admin|2017-01-31T18:05:51+00:00January 4th, 2014|Mortgage Rate|Comments Off on New Thinking On BoC Rate Hike